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CNC invests $110m in plant upgrade

Caribbean Nitrogen Company (CNC) will be spending more than $110 million on maintenance and upgrades to its N2000 plant at the Point Lisas Industrial Estate in Couva. During that turnaround hundreds of temporary jobs will be created.

CEO Jerome Dookie said the decision to invest was a direct result of the signing of a new natural gas agreement with the National Gas Company (NGC) after protracted and tumultuous negotiations with the state-owned enterprise.

“The signing of the contract has given us the confidence to continue to invest in N2000 and Trinidad and Tobago’s downstream sector,” he said.

“You may recall historically, when plants are having turnarounds people would turn up at the gate looking for work. Well that show-up-at-the-gate model no longer holds but it is the same concept where there is a lot of additional employment created. At peak times the employment on site will go up to as many as 1,000 workers.”

Dookie said petrochemicals is a long-term business that involves periodic turnarounds where the plant is shut down to carry out major maintenance that wouldn’t be possible while it is operating.

“The last turnaround at CNC, we spent $340 million and prior to that we also had to do some upgrades, so the actual spend was closer to $850 million. That commitment to keep spending is part of the business model. You have to invest that capital and maintenance funding to keep the plant running safely and reliably,” he explained.

Dookie was speaking for the first time since negotiations between his company and NGC caught national attention. NGC cut off the gas supply to CNC and the matter reached as far as the Prime Minister.

While Dookie made it clear that the time had come to move on from the standoff, he said T&T faced real challenges with competitiveness in an increasingly difficult global petrochemical market.

Traditionally, he explained, this country’s natural gas export market has been the US but that is now changing due to the availability of low-cost shale gas.

“There was a time when Trinidad production was causing production in the US to come off line. Now that trend is being reversed. You would find cheaper more abundant shale gas available in the US. You find production being increased there and our natural market is disappearing.

“As a result we have had to reach out more globally to sell our product. I will give you an example, our first shipment of product since we resumed production actually went to Belgium,” he said.

“Certainly the higher gas prices in T&T places us in a less competitive position in comparison to the US producers and that is something that has to be recognised.”

Asked what lessons were learnt from the negotiations, Dookie said such talks have to take into account the fact that “we all have to survive because if the price is too high for us to compete globally then there is no market for the gas. So going forward the negotiations have to consider that it has to be win-win and you have an equitable return to all the players.”

“We are selling product into a highly competitive global market and we need to be cost competitive to compete against the USA which is now a low cost producer because of the shale gas. The idea is to have a value chain that supports everyone along the way because we all need each other in order to survive because if the upstream producers don’t have the downstream consumers to sell the gas to then there is no point in producing it.”

Dookie talked about the relief felt by CNC’s management and staff when the new agreement was finally signed off on Easter Sunday.

“We had worked through most of the Easter weekend to finalise that deal and when we sent out word to the employees to come back out now there was that real sense of relief in the organisation,” he explained.

The CNC plant came online in 2002, so it has been operating for 16 years. CNC is part of the Proman Group which, over the years, has been involved in construction of 13 petrochemical plants in this country.

However, it is not well known is a major player in the downstream sector.

CNC has a capacity of 650,000 metric tonnes a year but with the gas supply not fully available, like all the other plants on the Point Lisas Industrial Estate, they are well below that capacity.

Dookie said over the last 15 years the company has contributed more than $17 billion to the local economy.

“We are talking about actual cheques written and money transferred that has gone into the local economy and that is, of course, just the direct payments, we are not talking about the multiplier effect.”

In the value chain, upstream producers like bpTT and Shell invest money to explore, discover and produce gas and through the services companies working for them they generate economic activity.

The gas is transported by the NGC which earns a profit from their activities, then makes its way to the CNC plant which employs people, pays taxes and generates billions of dollars in economic activity.

Like Finance Minister Colm Imbert, Dookie is hopeful there will be a return to full supply in the medium term. He praised Proman for investing upstream to increase gas supply.

“Building now on the downstream thrust with methanol and ammonia, Proman Group has now gone upstream in recognition of the gas shortage situation and has taken the bold step by investing heavily in DeNovo,” he explained.

However, Dookie is concerned that not enough people in the country understand the relationship between the energy sector and their everyday lives.

“One of the things that became apparent to me recently was the little connection people had between the quality of life and what the petrochemical sector means to the country. You go about Port-of-Spain and you see people living their lives as normal and the majority of the money that is generated to support that lifestyle actually comes from the energy sector and the petrochemical sector in particular,” he said.

Ammonia feeds the world, Dookie said, so he is optimistic that CNC will be able to continue in business, although that depends on a recognition that the world has changed and we all have to work together to ensure the local industry remains competitive for the long term.